Mad Cows, Meat Inspection, and Regulation

by Charles Goyette

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There's nothing funny about Mad Cow Disease.

But after the announcement this week of the discovery of an infected dairy cow in California, I couldn't help but think of a friend of mine, a stand-up comedian, who has a line about solving the actuarial problems of Social Security and Medicare by ending the state's "intrusive inspection of meat."

It gets a big laugh, but provokes an important question: What would happen if the state did not inspect meat – or other food products?

After the discovery of bovine spongiform encephalopathy (BSE), better known as Mad Cow Disease, in the U.S. in 2003, Japan halted the importation of American beef.

Motivated by a desire to resume selling to Japan, Creekstone Farms in Kansas invested heavily and built a testing lab so that it could independently test all of its cattle. This was a challenge to the USDA which, captured by the food industry it regulates, supports only random testing.

It should go without saying that large U.S. meatpackers opposed Creekstone's effort to pioneer new and improved testing protocols. A meat industry spokesman insisted that any testing should only take place under government oversight. In 2006, Creekstone was forced to sue the USDA for refusing it permission to test all of its cattle. In 2008, a U.S. Court of Appeals overturned a lower court ruling that would have allowed Creekstone to proceed. "We owe the USDA a considerable degree of deference," wrote a judge in the case.

Central planning in public safety is fraught with the same shortcomings as central planning elsewhere in the economy. It stifles progress and innovation, drives up costs, and protects powerful interests from competition. These are not shortcomings of regulation; they are the intended consequences.

Economist George Stigler, a Nobel laureate, has made the case that state regulation is designed to provide special privileges to regulated industries, protect them, and raise prices on their behalf. Of course this "regulatory capture" in which the regulators actually serve their industries is exactly the opposite of what the governing classes promise the public. Instead, regulating agencies restrict competition in ways that actually victimize the public. Stigler has suggested that "every industry or occupation that has enough political power to utilize the state will seek to control entry."

What would replace the "intrusive inspection of meat" In the absence of the state? Has the state even been doing a good job in its inspections? That is a question that can only be answered by asking "compared to what?"

Would the "poke and sniff" method of feeling and smelling meat – the mainstay of USDA inspections for almost a hundred years but one that cannot detect pathogenic bacteria and microbes like E. coli – have been improved on many years earlier than it was by innovators in a free economy looking for better ways of doing the job?

It is impossible to say.

Would one uniform standard of inspection have emerged, so clearly superior that it would go unchallenged? Or would there be many means of testing for food safety, each one offering greater thoroughness and more efficient costs than the next? It is impossible to know until creative minds attack the problem, a prospect that is sharply reduced in the presence of the state's monopoly.

If there were a widespread outbreak of Mad Cow Disease, how many would suffer needlessly because regulatory capture blocked new advances is testing? Innovations that never see the light of day, held back by the regulatory state, cannot be known. But in a free economy it is foolish to think that people wanting wholesome food will flounder about and go unsatisfied in the absence of the state.

This article is adapted from New York Times bestselling author Charles Goyette's new book Red and Blue and Broke All Over: Restoring America's Free Economy.

Copyright © 2012 Charles Goyette

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